The Hightower Report
Hard Times, Soft Heads; and Wall Street's Resilient Greed
Hard Times, Soft Heads
A recent New York Times headline used the word "soft" to describe today's economy. On what planet do the Times wordsmiths live? "Soft" implies cushions and comfort, while the economic reality that most Americans are experiencing is one of unrelenting hard times.
Indeed, the article itself reported that national economic growth this summer was pathetically weak. Tens of millions of people remain unemployed or underemployed, with millions of them having been mired in joblessness for nearly two years. Even those with jobs have seen their hours cut or wages slashed, so the nation's income growth was an abysmal 0.5% – and the bulk of that went to the richest Americans, who enjoyed a nice rise in their stock portfolios.
The way out of this, according to a flock of economic gurus roosting on their lofty theoretical perches, is for consumers to spend more. Yoo-hoo, wise ones – spend what? The Times conceded that, with the incomes of the masses plummeting, consumer demand remains "flaccid" (yet another word for soft). As noted by James K. Galbraith, a down-to-earth economist grounded in reality, "The problematic factor is that consumers remain fundamentally insolvent."
Still reaching for a silver lining in a dark and stormy cloud, the Times noted that American families are at least shedding some of their consumer debt. Good! Except that much of this is the result of millions of hard-hit families having to default on their credit card bills, student loans, mortgages, and other debts they can no longer pay.
The only things that are "soft" in today's economy are the heads of economists who keep blaming consumers rather than fingering the big bankers and corporate CEOs who continue to knock down America's wages, the middle class, and America itself.
Wall Street's Resilient Greed
It appears to be a truly amazing feat of magic. Right before your eyes, this thing rises into the air on its own, with no wires or mechanical devices giving it lift, and it hovers there effortlessly.
But it's not magic, for magic is an illusion, and this gravity-defying phenomenon of perpetual levitation is real. What is this "it" that keeps floating up, up, up? It's the annual bonuses paid to Wall Street's top bankers.
By the laws of economics, if not physics, bonuses should fall to Earth this year, because the bankers have performed poorly. Trading is down, profits are flat (despite a boost of trillions of dollars in nearly interest-free money from the feds), firms are firing lower-level employees, and banker greed has ruined the public reputations of the financial giants.
"Who cares?" shriek the big shots. "It's bonus time, baby, so grab all you can!" The CEOs of Goldman Sachs, Citigroup, JPMorgan Chase, and others have set aside billions of dollars to flood their executive suites with bonus cash at the end of the year – money that should go to shareholders. Their claim is: "We deserve it, for we took low pay during the crash of 2008-2009." For example, Lloyd Blankfein, Goldman Sachs' boss, was paid a mere $9 million last year, so this year he wants that "sacrifice" to be made up to him.
However, lest you worry that poor Lloyd's family needed food stamps to make ends meet in that tough $9 million year, note that he had a bit of a cushion, having pocketed a record Wall Street payday of $68 million in 2007 – even as his bank was crumbling.
One executive pay analyst says he assumed that bonuses would go down this year. But, he said, "I underestimated the industry's resiliency." By "resiliency," I assume he was referring to the industry's incurable greed.